Australia’s industrial market - Q&A with Rachael Ragusa

Q1. What’s changing fastest in industrial and logistics right now?

The market has become far more cautious and considered over the past 12 months. While there is still strong demand for quality industrial assets, occupiers are taking longer to make decisions due to ongoing economic uncertainty, changes in the broader financial landscape and increasing operational costs.

As a result, landlords are becoming more flexible and we’re seeing a stronger focus on incentives, lease terms and overall deal structure in order to secure quality tenants. In many cases, occupiers are also choosing to delay decisions or reassess timing until there is greater certainty around business conditions.

At the same time, tenants are placing a much greater emphasis on functionality and efficiency. They are looking beyond square metre rates and focusing more heavily on access, power, staff amenity, presentation and how effectively a property supports their day-to-day operations long term.

Q2. What’s one thing about this sector that’s widely misunderstood?

People often underestimate how sophisticated the industrial market has become across all levels of the sector. While many properties may appear similar on paper, the operational requirements behind each business are completely different.

In today’s market, occupiers are far more considered in their decision making and are focused on functionality, accessibility and efficiency just as much as price. Small details such as access, power supply, warehouse configuration and connectivity can have a major impact on how effectively a business can operate within a space.

Q3. What are clients most focused on today, and what have you learnt about what drives successful industrial deals and client relationships?

I’ve learnt pretty early on that communication and trust are everything in this sector. Industrial deals can move quickly and there are often a lot of moving parts, so clients really value transparency and consistency throughout the process.

From a leasing perspective, clients today are very focused on timing, flexibility and operational efficiency. Most occupiers already know exactly what works for their business, so listening properly and understanding the “why” behind their requirement is incredibly important.

The strongest client relationships are usually built long before a transaction actually happens.

Q4. Where are you seeing the biggest gaps or opportunities between landlord and tenant expectations?

One of the biggest gaps at the moment is around rental expectations versus operational realities. Landlords are very aware of market growth over recent years, while tenants are becoming more cautious around overall occupancy costs and business expenses.

I think the opportunity sits in creating more collaborative outcomes rather than purely transactional ones. Flexibility around lease structures, incentives, commencement timing or make-good obligations can often be the difference between getting a deal done or losing momentum entirely.

The most successful negotiations are usually the ones where both parties feel heard and understand each other’s priorities from the outset.

This article is from Knight Frank’s latest SPACE industrial and Logistics publication, which can be read here.